East Coast vs. West Coast Seaports

Eastern Seaboard Harbors the Winners: Shippers line up "Plan B" options to mitigate risk, driving East Coast growth

By MarEx 2014-09-03 10:11:00

Rumors of labor strikes and other supply chain disruptions are inspiring logistics executives to look toward the Eastern Seaboard. While West Coast ports remain dominant, JLL’s sixth annual Seaport Outlook shows rapid growth and demand for space by the nation’s ports on the East Coast.

“Shippers are turning to the Suez Canal to reach U.S. East Coast population centers,” said Rich Thompson, Managing Director of JLL’s Ports Airports and Global Infrastructure (PAGI) group. “This route helps offset the risks associated with potential disruption and costs associated with the Panama Canal and/or delays and potential disruptions at West Coast ports such as LA/Long Beach.”

“Last year was a banner year for shipping volumes, which were up by 3.3 percent on the previous peak seen in 2007,” he continued. “Of the 13 seaports ranked in JLL’s report, the West Coast seaports volumes were 6.8 percent below 2007 peak levels, while shipping volumes on the East Coast exceeded 19.1 percent.”

2014 Seaport Rankings*

Here are this year’s top 13 U.S. seaports:

The Port of New York/New Jersey topped JLL’s Index for the third consecutive year. The Port of Long Beach placed second, while Los Angeles rounds off the top three. Savannah, with consistent volume growth over the past decade, continues to lead JLL’s second tier of ports. While Jacksonville, previously in the second tier, now leads the Index’s third group owing to flat annual twenty-foot equivalent unit (TEU) volume and a lack of available industrial space.

Room to grow

Consumer goods represent a significant portion of port volume and are driving the need for a Plan B or an alternative to West Coast ports. As shippers and their retail clients look to store inventory stateside in the lead-up to the holiday season, warehouses near ports have become a hot commodity. Industrial real estate within a 15-mile radius of the 13 seaports tracked in the study accounts for 1.3 billion square feet—11.3 percent of the nation’s total 11.6 billion square feet. The average vacancy rate within this niche is only 7.7 percent, and several markets have planned and active developments under way. Most large requirements for modern space however will end up further inland.

“JLL is tracking 267.4 million square feet in active industrial space requirements in the U.S., and nearly 60 percent are based in markets within a three-hour drive-time of the seaports,” said Thompson. “To increase supply, nearly half of the nation’s 122.8 million square feet of construction activity is located within three hours of a major seaport, with the bulk found in the Inland Empire (Southern Cal), Central Pennsylvania and Houston.”

New infrastructure to come online

“While the East Coast industrial real estate market has yet to see a tangible impact of the cargo shift, we anticipate a rebalancing in the next few years,” said Thompson. “This will be evident when New York/New Jersey can start receiving the super-sized Post-Panamax ships later this year, and Miami and Jacksonville come online in 2015. The need for logistics and warehousing space is certain to grow.”

Inland ports driving traffic

According to JLL research, logistics suppliers and transportation providers are turning their focus to intermodal solutions to connect port cities with major population centers. To date, 30 inland port facilities have either opened or been formally announced since 2000, including 19 since 2008 alone.

A notable beneficiary is the Port of Savannah, which ships most of its cargo by rail to Atlanta and was ranked the “Fastest Growing Port” in the first half of 2014, according to PIERS research. Charlotte is also evolving as a hub market thanks to a new inland port connecting to Charleston.

*JLL’s Seaports Index ranks U.S. seaports based on terminal operating scores (their proximity to population density, transportation networks, recent infrastructure improvements) and the port area market score (industrial space availability and suitability).